ASIC pursues Mariner directors over allegedly unfunded takeover bid

The Australian Securities and Investments Commission has launched legal action against Investment company Mariner Corporation and its past and current directors over an attempted takeover bid for Austock in 2012.

ASIC is also pursuing the company’s chief executive Darren Olney-Fraser, current director Donald Christie and former director Matthew Fletcher for allegedly breaching their duties.

ASIC alleges the directors breached their duties by approving a bid for broker Austrock Group in June 2012 when the company did not have enough money to fund the takeover.

The corporate watchdog is alleging Mariner was reckless as to whether it could perform its obligations under the proposed bid because it did not have the financial resources to fund it, nor any commitment or assurance from another party to provide finances at the time of the announcement.

“The announcement was misleading because the proposed bid was at a price less than Mariner was permitted to offer and because it misled the market as to Mariner’s ability to fund the bid,” ASIC says in a statement.

“The directors breached their duties by failing to give sufficient consideration to the steps that needed to be taken before making the announcement.”

When Mariner made the bid in 2012, ASIC raised concerned about the company’s funding of the offer.

To make matters worse for Olney-Fraser, on Thursday the Federal Circuit Court permitted the Australian Taxation Office to proceed with a bankruptcy petition against him over unpaid company tax.

SmartCompany contacted Mariner and Olney-Fraser, but no comment was available.

The attempted takeover of Austock was just one of a series of failed takeover bids by the company at the time. Its attempts to takeover retailer Globe International in 2012 and broker Wilson HTM were not supported by shareholders.

On June 25, 2012, Mariner made an offer to acquire all of Austock Group’s shares for 10.5 cents a share, subject to a 50% acceptance of the offer.

“The offer price represents a 5% premium to Austock’s current trading price and its one-month rolling VWAP (volume-weighted average price), each being 10 cents per share at the time of our bid,” Mariner said in a statement to the ASX.

Later in the month Mariner upped its bid to 11 cents a share, on the back of a letter sent by Austock to the company outlining its concerns with its formal bidder’s statement.

In August 2012 it was announced Mariner Corporation had decided to withdraw its proposed takeover bid.

According to The Sydney Morning HeraldASIC’s statement of claim revealed Mariner had tried to obtain funding for the acquisition from Morgan Stanley, IOOF shareholder Bruce Neil and Macquarie Bank.

But despite supposedly not receiving support from Morgan Stanley, the directors opted to move ahead with the announcement of the takeover bid on June 25, 2012.

ASIC alleges Mariner would have needed $14 million to buy all of Austock’s shares, when its total assets were just $1.8 million and it had liabilities of $1.6 million.

Hall and Wilcox partner Deborah Chew told SmartCompany when a company makes a takeover bid, it’s legally required to basically have the finance before making the bid.

“Presumably what would have happened in this particular case is Mariner might have overstated their ability to get financing,” she says.

“If ASIC is making an argument that they engaged in misleading and deceptive conduct, there would have been a difference between what the company said was available in terms of financing and what their financial position actually was.”

Chew says the outcome of the case will depend on how the company represented its finances and what steps it had taken to secure financing.

“You need to look at the circumstances and see if the company was stretching the truth, if the financing fell through for reasons they had no control over, or if there were market conditions at the time which weren’t the fault of the company which caused its funding to fall through. It’s all dependent on the circumstances and what was happening in the market at the time,” she says.